The State of California has approved Stanford’s application to refinance around $900 million of tax-exempt debt. The University plans to launch a $250 million offering as early as next week.
“We’re aiming for long maturities,” said University Treasurer Odile Disch-Bhadkamkar, regarding the debt issuance. “Right now we’re looking at rates that would be in the low four percents.”
Since Stanford is not a public institution, it must issue tax-exempt debt through a conduit issuer, the California Educational Facilities Authority (CEFA). According to Disch-Bhadkamkar, while the authority issues debt on Stanford’s behalf, investors rely on the University’s credit for the repayment of the bonds.
In addition to the $300 million approved issuance, the University also received authorization to refinance approximately $600 million of its existing bond portfolio over the next five years. In order for Stanford to refinance its tax-exempt debt, it must get authorization from the state, a process that would delay the financing calendar by six to eight weeks.
“If there is an opportunity to refinance, we will be more agile, because this cuts six to eight weeks off our time to market,” Disch-Bhadkamkar said. “But we have no immediate plans to execute on that.”
“We’ve done this before,” Disch-Bhadkamkar added. “We’ve gotten authorization from the state in advance that has proven extremely helpful, particularly when the market melted down two years ago. We were able to finance a lot of our debt portfolio very quickly because we already had the authorization in hand.”
More than two-thirds of the debt issuance will go toward financing capital facilities, including the Knight Management Center, the Center for Nanoscale Science and Technology, the William H. Neukom Building at the Stanford Law School, the Lorry I. Lokey Stem Cell Research Building, the Li Ka Shing Center for Learning and Knowledge and Munger, in addition to renovations in dining services such as the Crothers dining hall.
Approximately two-thirds of Stanford’s total outstanding debt is tax-exempt.
Morgan Stanley, Goldman Sachs, J.P. Morgan and Prager, Sealy & Co., LLC will underwrite the issuance.
The Preliminary Official Statement of the offering is accessible from MuniOS.com.